Yet another week of price swings.

The week started as predicted on a weak note due to fears of the more virulent COVID-19 variant taking grips on economies around the world.

Then came the reversal.

According to an article in Bloomberg, the reason markets reversed from the selloff was due to large buying from retail.

They snapped up stocks at the fastest clip on record. These Reddit-fueled, Robinhood-powered retail crowd bought $2.2 billion into equities on Monday, 19 July 2021, alone, according to Vanda Research.

A study from DataTrek Research suggests Google searches for the Dow are a tell-tale sign for retail buying sprees that happened last week into the close on Friday, 23 July 2021.

It was interesting to see that Vanda Research estimated $482 million went into SPDR S&P ETF Trust on Monday, the highest amount on record suggesting day traders lacking confidence in picking individual stocks.

We can spend time looking closely at the latest rise in COVID-19 numbers or recent economic data as well as earnings that have been released. These were negative as well as positive.

At the end of the day, regardless of these fundamentals, the market could not stand in the way of buying from the retail crowd.

Here are the closing levels on Friday:-
Dow Jones 35,061.55 +238.2 +0.68%
S&P 500 4411.79 +44.31 +1.01%
Nasdaq Comp 14836.99 +152.39 +1.04%
US 10Y 1.281%
VIX 17.2

We can choose the fundamentals to fit our scenario. For example,  about 87% of the S&P 500 companies reporting results have beaten Wall Street estimates.

We can assume that the Delta variant is more of a problem outside of the US and therefore should not be too much of a concern.

Or we can focus on stocks that have done well during the pandemic, such as the megacap tech.
All these should point to more near-term gains.

The next question will be: how much higher can we go?
Does the retail crowd still have more funds to invest or are they fully invested?

It will be hard to fight the trend. Any bears still out there will be wise to remember the buying on dips we have seen the last few times we sold off.

Source: CBOE, Reuters, Bloomberg

This commentary was written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.

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